Singer Company has a line of credit with United Bank. Singer can borrow up to $448,000 at any time over the course of the 2016 calendar year. The following table shows the prime rate expressed as an annual percentage along with the amounts borrowed and repaid during the first three months of 2016. Singer agreed to pay interest at an annual rate equal to 2.00 percent above the bank’s prime rate. Funds are borrowed or repaid on the first day of each month. Interest is payable in cash on the last day of the month. The interest rate is applied to the outstanding monthly balance. For example, Singer pays 6.25 percent (4.25 percent + 2.00 percent) annual interest on $81,800 for the month of January.
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| Month | Amount Borrowed or (Repaid) | Prime Rate for the Month, % | ||||||
| January | $ | 81,800 | 4.25 | |||||
| February | 120,600 | 3.25 | ||||||
| March | (21,400 | ) | 3.75 | |||||
| Required |
Provide all journal entries pertaining to Singer’s line of credit for the first three months of 2016.
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| Month | Amount Borrowed (Repaid) | Balance End of Month | Interest Rate | Interest Expense | ||||||
| January | $ | 81,800 | $ | 81,800 | 0.0625/12 | $ | 426 | |||
| February | 120,600 | 202,400 | 0.0525/12 | 885 | ||||||
| March | (21,400 | ) | 181,000 | 0.0575/12 | 867 | |||||
Thank you!
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